Harmony Biosciences(HRMY) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents Harmony Biosciences Holdings, Inc.'s unaudited condensed consolidated financial statements, including the Balance Sheets, Statements of Operations and Comprehensive Income, Statements of Stockholders' Equity, and Statements of Cash Flows, along with detailed notes explaining the company's financial position, performance, and significant accounting policies Condensed Consolidated Balance Sheets (Unaudited) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total Assets | $1,108,008 | $999,200 | | Total Liabilities | $334,928 | $340,045 | | Total Stockholders' Equity | $773,080 | $659,155 | | Cash and cash equivalents | $546,050 | $453,001 | | Retained earnings | $87,552 | $2,216 | Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change (3 Months) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change (6 Months) | | :-------------------- | :--------------------------- | :--------------------------- | :-------------------- | :--------------------------- | :--------------------------- | :-------------------- | | Net product revenue | $200,489 | $172,814 | +16.0% | $385,222 | $327,429 | +17.7% | | Gross profit | $162,336 | $140,670 | +15.4% | $315,075 | $267,801 | +17.6% | | Operating income | $48,180 | $21,356 | +125.6% | $104,425 | $73,389 | +42.3% | | Net income | $39,776 | $11,591 | +243.1% | $85,336 | $49,925 | +70.9% | | Basic EPS | $0.69 | $0.20 | +245.0% | $1.49 | $0.88 | +69.3% | | Diluted EPS | $0.68 | $0.20 | +240.0% | $1.46 | $0.87 | +67.8% | Condensed Consolidated Statements of Stockholders' Equity (Unaudited) | Metric (in thousands) | Balance as of Dec 31, 2024 | Net Income (6M 2025) | Stock-based Compensation (6M 2025) | Exercise of Options (6M 2025) | Balance as of June 30, 2025 | | :-------------------- | :------------------------- | :------------------- | :--------------------------------- | :---------------------------- | :-------------------------- | | Total Stockholders' Equity | $659,155 | $85,336 | $23,954 | $4,462 | $773,080 | Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | | Net cash provided by operating activities | $113,314 | $73,758 | +53.6% | | Net cash used in investing activities | $(17,227) | $(61,042) | -71.8% | | Net cash used in financing activities | $(3,038) | $(7,080) | -57.1% | | Net increase in cash, cash equivalents, and restricted cash | $93,049 | $5,636 | +1551.0% | | Cash, cash equivalents, and restricted cash—End of period | $546,320 | $317,566 | +72.0% | Notes to Unaudited Condensed Consolidated Financial Statements 1. Organization and Description of Business Harmony Biosciences Holdings, Inc. is a neuroscience company focused on rare neurological diseases, with its lead product WAKIX (pitolisant) approved for narcolepsy. The company is expanding its portfolio through internal development and strategic acquisitions, including next-generation pitolisant formulations, an orexin-2 receptor agonist, and assets for rare epilepsy and neurobehavioral disorders - Harmony Biosciences is a neuroscience company focused on rare neurological diseases, with its lead product WAKIX (pitolisant) approved for excessive daytime sleepiness (EDS) and cataplexy in adult narcolepsy patients, and EDS in pediatric patients (6+ years)[14][15] - The company is expanding its portfolio through the acquisition of Zynerba Pharmaceuticals (renamed Harmony Biosciences Management, Inc.) for transdermal cannabidiol therapies for orphan neurobehavioral disorders, and Epygenix Therapeutics for rare epilepsy treatments (Dravet Syndrome and Lennox-Gastaut Syndrome)[16][17] - Harmony also entered a sublicense agreement for an orexin 2 receptor agonist (BP1.15205) for narcolepsy and other indications, and is developing next-generation pitolisant formulations (Gastro-Resistant and High-Dose)[15][17] 2. Liquidity and Capital Resources The company maintains a strong liquidity position with $672.3 million in cash, cash equivalents, and investments as of June 30, 2025, and believes these resources, along with future operating and financing activities, will be sufficient to meet operational and investment needs for the next twelve months | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Retained earnings | $87,552 | $2,216 | | Cash, cash equivalents and investments | $672,282 | N/A | - The company believes its existing cash, cash equivalents, and investments, along with future cash generation, will cover operational liquidity and potential investing activities for the next twelve months[20] 3. Summary of Significant Accounting Policies This note outlines the accounting principles used in preparing the unaudited condensed consolidated financial statements, including GAAP conformity, consolidation practices, and key estimates. It also discusses significant risks, the company's single operating segment (rare neurological diseases), fair value measurements, and recently adopted and issued accounting pronouncements - The financial statements are prepared in conformity with GAAP, with all intercompany accounts and transactions eliminated in consolidation[21] - The company operates in a single operating segment: rare neurological diseases, with all tangible assets, operations, and revenue generated in the United States[26] - Key accounting estimates include rebates, R&D expenses, stock-based compensation, and income taxes. The company adopted ASU 2023-07 (Improvements to Reportable Segment Disclosures) in Q4 2024, which had no financial statement impact[25][26][43] - New ASUs, 2023-09 (Income Tax Disclosures) and 2024-03 (Expense Disaggregation Disclosures), are being evaluated for future impact[44][45] 4. Acquisitions Details the acquisition of Epygenix in April 2024 for $35 million upfront, plus potential milestone payments up to $645 million. This acquisition granted the company exclusive rights to clemizole for Dravet Syndrome and Lennox-Gastaut Syndrome, and was accounted for as an asset acquisition, resulting in a $17.095 million IPR&D expense in 2024 - On April 30, 2024, Harmony acquired Epygenix for $35 million upfront, gaining exclusive rights to clemizole for Dravet Syndrome and Lennox-Gastaut Syndrome[46] - The acquisition includes potential future payments of up to $130 million for development/regulatory milestones and up to $515 million for sales-based milestones[46] - Accounted for as an asset acquisition, it resulted in a $17.095 million charge for acquired in-process research and development (IPR&D) expense during the year ended December 31, 2024[47] 5. Investments The company's investments consist of available-for-sale debt securities, primarily commercial paper, corporate debt, and U.S. government securities, carried at fair value. Total investments increased slightly from December 31, 2024, to June 30, 2025 | Investment Type (in thousands) | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :----------------------------- | :----------------------- | :--------------------------- | | Short-term investments | $19,224 | $14,185 | | Long-term investments | $107,008 | $108,874 | | Total Investments | $126,232 | $123,059 | - Investments are classified as available-for-sale debt securities and are carried at fair value, with unrealized gains and losses recorded as a component of accumulated comprehensive income in stockholders' equity[35] 6. Fair Value Measurements The company measures certain assets and liabilities at fair value using a hierarchy (Level 1, 2, 3). Money market funds are Level 1, while available-for-sale debt securities are Level 2, valued using third-party pricing services. No assets or liabilities were classified as Level 3 | Asset (in thousands) | June 30, 2025 Total | June 30, 2025 Level 1 | June 30, 2025 Level 2 | Dec 31, 2024 Total | Dec 31, 2024 Level 1 | Dec 31, 2024 Level 2 | | :------------------- | :------------------ | :-------------------- | :-------------------- | :----------------- | :------------------- | :------------------- | | Cash equivalents | $301,425 | $301,425 | — | $303,545 | $303,545 | — | | Commercial paper | $11,617 | — | $11,617 | $7,678 | — | $7,678 | | Corporate debt securities | $97,253 | — | $97,253 | $93,257 | — | $93,257 | | U.S. government securities | $17,362 | — | $17,362 | $22,124 | — | $22,124 | | Total | $427,657 | $301,425 | $126,232 | $426,604 | $303,545 | $123,059 | - Money market funds are classified as Level 1, and available-for-sale debt securities (commercial paper, corporate debt, U.S. government securities) are classified as Level 2. No Level 3 assets or liabilities were held[49][50] 7. Inventory Inventory, net, decreased from $7.198 million at December 31, 2024, to $6.100 million at June 30, 2025, primarily due to a reduction in finished goods and work in process, and the establishment of a reserve for excess inventory | Inventory Component (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :--------------------------------- | :------------ | :---------------- | :----- | | Raw materials | $901 | $944 | -$43 | | Work in process | $3,209 | $3,489 | -$280 | | Finished goods | $2,155 | $2,765 | -$610 | | Inventory, gross | $6,265 | $7,198 | -$933 | | Reserve for excess inventory | $(165) | — | -$165 | | Total inventory, net | $6,100 | $7,198 | -$1,098| 8. Intangible Assets Intangible assets primarily relate to capitalized milestone payments for WAKIX FDA approvals and sales achievements under the 2017 LCA. The net book value decreased to $101.341 million as of June 30, 2025, due to amortization, with an expected remaining useful life of 4.3 years - Intangible assets include capitalized milestone payments for WAKIX FDA approvals for EDS (2019, $75 million), cataplexy (2020, $100 million), and achieving $500 million in net sales (2022, $40 million)[52][53][54] | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Gross Carrying Amount | $215,000 | $215,000 | | Accumulated Amortization | $(113,659) | $(101,737) | | Net Book Value | $101,341 | $113,263 | - Amortization expense was $11.922 million for both the six months ended June 30, 2025, and 2024. The remaining useful life for these assets is 4.3 years as of June 30, 2025[55][56] 9. License Agreements and Asset Purchase Agreements Details various agreements including the 2017 LCA with Bioprojet for WAKIX, the 2022 LCA for next-generation pitolisant products, a sublicense for an orexin-2 receptor agonist, an APA with ConSynance for HBS-102, and a CiRC Agreement for cell replacement therapy candidates. These agreements involve upfront fees, milestone payments, and royalties, significantly impacting R&D expenses - Bioprojet Agreements: * 2017 LCA: Exclusive rights to pitolisant in the US. Triggered milestone payments for FDA approvals and sales, and requires tiered royalties (e.g., $65.340 million for 6M 2025)[57][58] * 2022 LCA: Exclusive rights to next-generation pitolisant products in US/Latin America, with a $30 million upfront fee (Oct 2022) and potential $155 million in development/sales milestones[59] * Sublicense (April 2024): Exclusive rights to orexin-2 receptor agonist (BP1.15205) in US/Latin America, with a $25.5 million upfront license fee (expensed as IPR&D in 2024) and potential $367.5 million in milestones/royalties[60] - ConSynance Agreement (August 2021): Acquired HBS-102 globally (ex-Greater China) for $3.5 million. Triggered $0.75 million (March 2023) and $1.0 million (Sept 2024) preclinical milestone payments (expensed as IPR&D). Potential $173 million in future milestones[61] - CiRC Agreement (June 2025): Research collaboration for two discovery-stage candidates for refractory epilepsies and treatment-resistant narcolepsy. Paid $15 million upfront fee (expensed as IPR&D in 6M 2025). Potential $4 million for research milestones and $16 million for option exercise fees, plus future development, regulatory, and sales-based milestones[62] 10. Accrued Expenses Accrued expenses decreased slightly from $120.640 million at December 31, 2024, to $118.293 million at June 30, 2025, primarily due to lower royalties due to Bioprojet, partially offset by increases in rebates and other sales deductions, sales and marketing, and professional fees | Accrued Expense (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :----------------------------- | :------------ | :---------------- | :----- | | Royalties due to Bioprojet | $35,783 | $51,746 | -$15,963 | | Rebates and other sales deductions | $61,129 | $50,542 | +$10,587 | | Interest | $2,328 | $2,834 | -$506 | | Sales and marketing | $4,612 | $2,166 | +$2,446 | | Research and development | $7,590 | $9,014 | -$1,424 | | Professional fees, consulting, and other services | $5,240 | $3,047 | +$2,193 | | Other expenses | $1,611 | $1,291 | +$320 | | Total | $118,293 | $120,640 | -$2,347 | 11. Debt The company has a $200 million Term Loan A Credit Agreement, with $173.750 million principal outstanding as of June 30, 2025. Quarterly principal payments are $3.750 million, increasing to $5.0 million from December 31, 2025, with a final $115 million payment due July 2028. Interest expense decreased due to lower Term SOFR rates - The company has a $200 million Term Loan A Credit Agreement (TLA Term Loan) with $173.750 million principal outstanding as of June 30, 2025[64][66] - Repayment schedule includes quarterly $3.750 million principal payments (increasing to $5.0 million from Dec 2025) and a $115 million payment due at maturity (July 2028)[65][67] | Interest Expense (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Interest on principal balance | $3,483 | $4,228 | $7,153 | $8,583 | | Amortization of deferred financing costs | $163 | $176 | $329 | $356 | | Total term loan interest expense | $3,646 | $4,404 | $7,482 | $8,939 | 12. Leases The company holds operating leases for office space and a fleet of automobiles. Operating lease costs were $0.598 million for Q2 2025 and $1.065 million for H1 2025. The weighted-average remaining lease term is 1.6 years, with total lease liabilities of $1.278 million as of June 30, 2025 - The company has operating leases for office space in Plymouth Meeting, PA, and a fleet of automobiles that are primarily used by its sales force[68] | Lease Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Operating lease right-of-use assets | $1,277 | $2,122 | | Total operating lease liabilities | $1,278 | $2,140 | - Operating lease costs were $0.598 million for the three months ended June 30, 2025, and $1.065 million for the six months ended June 30, 2025. The weighted-average remaining lease term for operating leases was 1.6 years[70] 13. Commitments and Contingencies The company is involved in ANDA litigation with multiple generic drug manufacturers (Lupin, Novugen, Novitium, Zenara, AET, Annora, MSN) regarding WAKIX patents. Settlements have been reached with Novugen, Annora, and Lupin, allowing them to sell generic products starting January 2030 or earlier under certain conditions. The remaining cases are consolidated for trial in February 2026 - Harmony and Bioprojet are engaged in ANDA litigation against multiple generic manufacturers (Lupin, Novugen, Novitium, Zenara, AET, Annora, MSN) challenging WAKIX patents ('947, '197, '430) which expire between Feb 2026 and March 2030[75][76][77][78] - Settlements have been reached with Novugen (Oct 2024), Annora (March 2025), and Lupin (June 2025), granting them licenses to sell generic WAKIX starting January 2030, or earlier under specific circumstances[83][85][86] - Remaining ANDA cases are consolidated, with a claim construction hearing set for March 27, 2025, and a four-day bench trial scheduled for February 17, 2026[79][81] 14. Stockholders' Equity Details common stock characteristics and the share repurchase program. As of June 30, 2025, 57,537,869 shares of common stock were issued and outstanding. The October 2023 Repurchase Program authorized up to $200 million in share repurchases, with $150 million remaining as of June 30, 2025, and no shares repurchased in Q2 or H1 2025 - As of August 1, 2025, there were 57,532,601 shares of common stock outstanding. As of June 30, 2025, 57,537,869 shares were issued and outstanding[4][8] - The Board approved a $200 million share repurchase program in October 2023, with $150 million remaining as of June 30, 2025. No shares were repurchased during the three or six months ended June 30, 2025, or 2024[89] 15. Stock Incentive Plan and Stock-Based Compensation The company operates under the 2020 Stock Incentive Plan (and previously the 2017 Plan), granting stock options, SARs, and RSUs. Stock-based compensation expense for H1 2025 was $23.844 million, with significant unrecognized expense remaining. The ESPP allows employees to purchase shares at a 15% discount - The 2020 Stock Incentive Plan allows for grants of stock options, SARs, RSUs, and other awards, with 8,620,499 shares available for issuance as of June 30, 2025[90][91] | Stock-Based Compensation Expense (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Research and development expense | $2,113 | $1,683 | $4,415 | $3,054 | | Sales and marketing expense | $1,652 | $2,100 | $4,396 | $4,094 | | General and administrative expense | $7,629 | $7,180 | $15,033 | $14,249 | | Total | $11,394 | $10,963 | $23,844 | $21,397 | - Total unrecognized stock-based compensation expense as of June 30, 2025, was $59.155 million for stock options and $25.038 million for RSUs, to be recognized over weighted average periods of 2.6 years and 3.1 years, respectively[100][101] - The Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase common stock at a 15% discount[102] 16. Segment Information The company operates as a single reportable segment focused on rare neurological diseases, with WAKIX as its sole revenue-generating product. The CEO, as CODM, assesses performance using consolidated net income to allocate resources - The company operates in a single reportable segment: rare neurological diseases, deriving all revenue from WAKIX sales[103] - The Chief Operating Decision Maker (CODM), the CEO, assesses segment performance using consolidated net income to guide resource allocation[104] | Segment Expense (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net product revenue | $200,489 | $172,814 | $385,222 | $327,429 | | Cost of product sold | $38,147 | $32,140 | $70,134 | $59,617 | | Research and development | $33,046 | $19,305 | $65,284 | $40,123 | | Sales and marketing | $28,421 | $26,407 | $56,388 | $51,646 | | General and administrative | $20,334 | $13,996 | $38,212 | $26,486 | | Consolidated net income | $39,776 | $11,591 | $85,336 | $49,925 | 17. Earnings Per Share Basic EPS is calculated by dividing net income by weighted average common shares outstanding, while diluted EPS includes the dilutive effects of stock options, SARs, and RSUs. Both basic and diluted EPS significantly increased for the three and six months ended June 30, 2025, compared to 2024 | EPS Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic EPS | $0.69 | $0.20 | $1.49 | $0.88 | | Diluted EPS | $0.68 | $0.20 | $1.46 | $0.87 | | Weighted Average Shares | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic | 57,469,775 | 56,802,357 | 57,390,298 | 56,786,873 | | Diluted | 58,427,134 | 57,541,696 | 58,468,717 | 57,571,570 | 18. Income Taxes The effective income tax rate decreased significantly for both the three and six months ended June 30, 2025, compared to 2024, primarily due to a non-deductible IPR&D charge in 2024, increased R&D and orphan drug credits, and lower state taxes | Tax Rate Component | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Federal income tax rate | 21.0% | 21.0% | 21.0% | 21.0% | | Nondeductible IPR&D | — | 16.5% | — | 4.9% | | Credits | (2.7)% | (2.6)% | (2.6)% | (1.6)% | | State taxes | 1.3% | 11.2% | 1.2% | 7.4% | | Total Effective Tax Rate | 19.9% | 46.6% | 20.1% | 32.1% | - The decrease in the effective tax rate was primarily driven by a $17.1 million non-deductible IPR&D charge related to the Epygenix acquisition recognized during the three and six months ended June 30, 2024, an increase in the benefits from research and development and orphan drug credits, and a decrease in state taxes[165] 19. Related-Party Transactions The company has a right-of-use agreement and receives consulting services from Paragon Biosciences, LLC, an entity with common ownership. Harmony also entered into a research collaboration with CiRC Biosciences, Inc., an entity controlled by Paragon, involving a $15 million upfront payment - Harmony incurred $0.255 million (Q2 2025) and $0.328 million (H1 2025) in expenses to Paragon Biosciences, LLC for office space and consulting services. Paragon shares common ownership with Harmony[112] - Harmony entered a CiRC Agreement with CiRC Biosciences, Inc. (controlled by Paragon), paying a $15 million upfront fee for research collaboration on two discovery-stage candidates[113] 20. Subsequent Event The "One Big Beautiful Bill Act" (OBBBA) was enacted on July 4, 2025, allowing immediate expensing of domestic R&D expenses. The company is evaluating the impact of this new law on its financial statements - The "One Big Beautiful Bill Act" (OBBBA) was enacted on July 4, 2025, allowing immediate expensing of domestic research and development expenses[114] - The company is currently evaluating the impact of the OBBBA on its condensed consolidated financial statements[114] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Harmony Biosciences' financial condition and results of operations, including an overview of its business, commercial performance, detailed analysis of revenue and expenses, liquidity, and capital resources. It also includes cautionary notes regarding forward-looking statements and critical accounting estimates Cautionary Note Regarding Forward-Looking Statements - The report contains forward-looking statements covered by safe harbor provisions, which involve known and unknown risks and uncertainties that may cause actual results to differ materially[115] - Important factors that could cause differences include commercialization efforts for WAKIX, market acceptance of new products, R&D plans, regulatory approvals, financing needs, competition, and intellectual property[115] - The company does not plan to publicly update or revise any forward-looking statements unless required by applicable law[119] Company Overview - Harmony Biosciences is a neuroscience company dedicated to addressing unmet needs in patients living with neurological diseases[124] - The company's portfolio covers sleep/wake, neurobehavioral, and rare epilepsy, leveraging scientific insights and pioneering approaches to advance meaningful treatments[124] Sleep/Wake Franchise - WAKIX (pitolisant) is approved for EDS and cataplexy in adult narcolepsy patients, and for EDS in pediatric patients (6+ years) as of June 2024[125][128] - The company is pursuing a Phase 3 registrational study (TEMPO) for pitolisant in Prader-Willi Syndrome (PWS) and has positive Phase 2 data for pitolisant in myotonic dystrophy type 1 (DM1)[127] - Development is underway for next-generation pitolisant formulations: Pitolisant GR (pivotal bioequivalence study initiated Q1 2025, PDUFA 2026) and Pitolisant HD (Phase 3 trials for narcolepsy/IH planned Q4 2025, PDUFA 2028)[131] - Preclinical development of BP1.15205 (orexin-2 receptor agonist) shows significant wake-promoting and cataplexy-suppressing effects, with first-in-human studies planned for H2 2025[132] - A research collaboration with CiRC Biosciences was initiated in June 2025 for cell replacement therapy candidates for refractory epilepsies and treatment-resistant narcolepsy[133] Neurobehavioral Franchise - Harmony acquired Zynerba in October 2023, adding ZYN002, a transdermal cannabidiol gel, to its portfolio[135] - ZYN002 is in a Phase 3 registrational trial (RECONNECT) for Fragile X Syndrome (FXS), with topline data anticipated in Q3 2025. Patent protection for FXS extends until 2038[135] - A Phase 3 registrational study for 22q deletion syndrome is planned for 2025, contingent on positive RECONNECT study data[135] Rare Epilepsy Franchise - Harmony acquired Epygenix in April 2024, securing exclusive rights to EPX-100 for Dravet Syndrome (DS) and Lennox-Gastaut Syndrome (LGS)[136] - EPX-100 is currently in two Phase 3 registrational clinical trials (ARGUS Study for DS and LIGHTHOUSE Study for LGS)[136] - The company is also developing EPX-200, a liquid formulation of lorcaserin, for the treatment of developmental and epileptic encephalopathies (DEEs)[137] Commercial Performance Metrics - As of June 30, 2025, approximately 7,600 patients were on WAKIX, and the company has formulary access for more than 80% of all insured lives (Commercial, Medicare and Medicaid) in the United States[138] - The number of unique healthcare professional (HCP) prescribers of WAKIX has continued to grow since its U.S. commercial launch in November 2019[138] Financial Operations Overview Provides an overview of key financial statement line items. Net product revenue is influenced by shipments, price, and discounts. Cost of product sales includes manufacturing, royalties, and distribution. R&D expenses are increasing due to pipeline expansion, while S&M and G&A expenses are also expected to rise to support commercialization and public company operations - Net product revenue includes product shipments less sales discounts and allowances, which can fluctuate based on patient mix and estimates[139] - Cost of product sales includes manufacturing, distribution, API costs, FDA fees, and royalties, and is expected to increase with WAKIX production and supply chain diversification[140] - Research and development expenses are increasing due to advancing clinical programs (pitolisant, ZYN002, EPX-100, EPX-200, Pitolisant GR/HD, BP1.15205, HBS-102) and are expensed as incurred[142][144] - Sales and marketing expenses are expected to increase to support WAKIX indications and portfolio expansion. General and administrative expenses are also anticipated to rise due to commercialization efforts, R&D activities, and public company operating costs, including legal fees for patent lawsuits[147][150] Results of Operations Provides a detailed analysis of the company's financial performance for the three and six months ended June 30, 2025, compared to 2024, highlighting revenue growth, changes in operating expenses, and the impact of IPR&D charges on R&D and effective tax rates | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change (3 Months) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change (6 Months) | | :-------------------- | :--------------------------- | :--------------------------- | :-------------------- | :--------------------------- | :--------------------------- | :-------------------- | | Net product revenue | $200,489 | $172,814 | +16.0% | $385,222 | $327,429 | +17.7% | | Cost of product sales | $38,153 | $32,144 | +18.7% | $70,147 | $59,628 | +17.6% | | Research and development | $50,159 | $63,583 | -21.1% | $84,699 | $85,772 | -1.3% | | Sales and marketing | $30,073 | $28,507 | +5.5% | $60,784 | $55,740 | +9.0% | | General and administrative | $33,924 | $27,224 | +24.6% | $65,167 | $52,900 | +23.2% | | Interest expense | $(3,646) | $(4,404) | -17.2% | $(7,482) | $(8,939) | -16.3% | | Interest income | $5,296 | $4,705 | +12.6% | $10,340 | $9,133 | +13.2% | | Income tax expense | $(9,861) | $(10,103) | -2.4% | $(21,478) | $(23,554) | -8.8% | | Net income | $39,776 | $11,591 | +243.1% | $85,336 | $49,925 | +70.9% | - Net product revenue increased due to a 10.0% (Q2) / 13.2% (H1) increase in units shipped and a 7% price increase, partially offset by higher rebates[156] - R&D expenses decreased primarily due to a $42.6 million IPR&D charge in Q2/H1 2024 (Bioprojet Sublicense, Epygenix acquisition) not recurring in 2025, partially offset by a $15.0 million IPR&D charge in Q2/H1 2025 (CiRC Agreement) and increased clinical trial expenses for EPX-100, ZYN002, Pitolisant GR/HD[159][160] - G&A expenses increased due to higher legal and professional fees, primarily associated with patent lawsuits[162] - The effective tax rate decreased significantly in 2025 due to the non-deductible IPR&D charge in 2024, increased R&D and orphan drug credits, and lower state taxes[165] Liquidity, Sources of Funding and Capital Resources The company has strong liquidity with $672.3 million in cash and investments as of June 30, 2025, and believes it can meet operational and investment needs for the next 12 months. It details the Term Loan A Credit Agreement, share repurchase program, and significant payments related to the Epygenix acquisition, ConSynance, Bioprojet, and CiRC agreements - As of June 30, 2025, the company had $672.3 million in cash, cash equivalents, and investments, and $173.8 million in outstanding debt[166] - The company believes its current liquidity is sufficient for operational and investment needs for the next 12 months[167] - Term Loan A Credit Agreement: $200 million senior secured term loan, with $173.8 million outstanding. Quarterly principal payments of $3.8 million (increasing to $5.0 million from Dec 2025), maturity July 2028[168][169] - Share Repurchase Program: $200 million program approved in Oct 2023, with $150 million remaining as of June 30, 2025. No repurchases in Q2 or H1 2025[171] - Acquisition/License Payments: * Epygenix (April 2024): $35 million upfront, potential $645 million in milestones[172] * ConSynance (HBS-102): $3.5 million acquisition, $1.8 million in preclinical milestones paid, potential $173 million in future milestones[173] * Bioprojet Sublicense (BP1.15205, April 2024): $25.5 million upfront, potential $367.5 million in milestones/royalties[174][175] * CiRC Agreement (June 2025): $15 million upfront, potential $4 million research milestones, $16 million option exercise fees, plus future milestones/royalties[176] Cash Flows | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | | Operating activities | $113,314 | $73,758 | +53.6% | | Investing activities | $(17,227) | $(61,042) | -71.8% | | Financing activities | $(3,038) | $(7,080) | -57.1% | - Net cash from operating activities increased to $113.3 million (from $73.8 million in 2024), driven by higher net income and non-cash adjustments like stock-based compensation and IPR&D[178][179] - Net cash used in investing activities decreased to $17.2 million (from $61.0 million in 2024), primarily due to lower upfront fees for Bioprojet sublicense and Epygenix acquisition in 2025 compared to 2024[180][181] - Net cash used in financing activities decreased to $3.0 million (from $7.1 million in 2024), mainly due to higher proceeds from exercised stock options in 2025[182][183] Critical Accounting Estimates - Key accounting estimates include revenue recognition for WAKIX sales, costs incurred under R&D agreements, stock-based compensation expense, income tax provisions, and accounting treatment for business combinations[185] - No material changes to accounting policies or assumptions were made during the quarter, except as disclosed in Note 3 to the unaudited condensed consolidated financial statements[186] Recent Accounting Pronouncements - Refer to Note 3 to the unaudited condensed consolidated financial statements for information on recently adopted and issued accounting pronouncements[187] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, specifically interest rate fluctuation risk, foreign currency fluctuation risk, and inflation fluctuation risk, and assesses their potential impact on financial condition and results of operations Interest Rate Fluctuation Risk - The company is exposed to interest rate risk from its investment portfolio ($427.7 million as of June 30, 2025) and its variable-rate Term Loan ($173.8 million outstanding)[188][189] - An immediate 10% change in market interest rates or Term SOFR would not have a material impact on the company's financial position or results of operations[188][191] Foreign Currency Fluctuation Risk - The company is not currently exposed to significant market risk related to changes in foreign currency exchange rates, but may be in the future due to contracts with foreign vendors located in Europe[192] Inflation Fluctuation Risk - Inflation may affect the company by potentially increasing costs such as labor and clinical trial costs, but it did not have a material effect on the business, financial condition, or results of operations for the three and six months ended June 30, 2025, and 2024[193] Item 4. Controls and Procedures This section details management's evaluation of the company's disclosure controls and procedures, concluding their effectiveness as of June 30, 2025. It also confirms no material changes in internal control over financial reporting and acknowledges the inherent limitations of control systems Evaluation of Disclosure Controls and Procedures - Management, including the principal executive officer and principal financial officer, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[194] - These controls provide reasonable assurance that required information is recorded, processed, summarized, and reported within specified time periods[194] Changes in Internal Control over Financial Reporting - There were no changes in the company's internal control over financial reporting during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting[195] Limitations on Effectiveness of Controls and Procedures - Management acknowledges that no control system, no matter how well designed and operated, can prevent all errors and all fraud, providing only reasonable, not absolute, assurance due to inherent limitations and resource constraints[196] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is subject to ordinary course legal claims, but management believes no current claims would have a material adverse effect on operations or financial condition, apart from the ANDA litigation detailed in Note 13 - The company is subject to claims and suits arising in the ordinary course of business, but management believes there are currently no material claims or lawsuits outstanding other than the Abbreviated New Drug Application ("ANDA") litigation[198] - Refer to Part I, Item I, Note 13 "Commitments and Contingencies," of this Quarterly Report for a full description of the company's material pending legal matters[199] Item 1A. Risk Factors Refers readers to the discussion of risk factors in the Annual Report on Form 10-K for the year ended December 31, 2024, and other sections of this report, noting that additional unknown risks may also exist - Readers should carefully consider the discussion of risk factors affecting the Company as set forth in Part I, Item 1A "Risk Factors" included in the Annual Report on Form 10-K for the year ended December 31, 2024[200] - Additional risks and uncertainties not currently known to the company or that it currently deems to be immaterial may also materially adversely affect its business, financial condition, and operating results[200] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds States that there were no unregistered sales of equity securities or use of proceeds during the reporting period - None[201] Item 3. Defaults upon Senior Securities States that there were no defaults upon senior securities during the reporting period - None[202] Item 4. Mine Safety Disclosures States that this item is not applicable to the company - Not applicable[203] Item 5. Other Information Reports that no director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2025 - No director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2025[204] Item 6. Exhibits Lists the exhibits filed with the Form 10-Q, including certifications, financial statements in XBRL format, and other incorporated documents - The report includes certifications from the Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and financial statements formatted in Inline XBRL (Exhibit 101)[207] Signatures The report is duly signed on behalf of Harmony Biosciences Holdings, Inc. by its President, Chief Executive Officer, and Director, Jeffrey M. Dayno, and its Chief Financial Officer and Chief Administrative Officer, Sandip Kapadia, on August 5, 2025 - The report is signed by Jeffrey M. Dayno (President, Chief Executive Officer and Director) and Sandip Kapadia (Chief Financial Officer and Chief Administrative Officer) on August 5, 2025[210]